Watch the webinar
In today’s webinar on race and equality in the workplace, the discussion centered on pay gap reporting. We were joined for the webinar by Baroness Ruby McGregor-Smith CBE, President of the British Chamber of Commerce, Naeema Choudry, Partner at Eversheds Sutherland, and Rain Newton-Smith, CBI Chief Economist.
Here’s what they spoke about:
- Collecting the data
- Recruitment and progression
- Intersectionality and culture
- The law
Collecting the data
Rain Newton-Smith, Chief Economist of the CBI, introduced the session talking about the CBI’s own experiences of reporting on its ethnicity pay gap. "It’s such an important topic. As a chief economist I can speak about how important it is to inclusive growth," she said.
"The CBI is one of only a few hundred organisations that voluntarily release their ethnicity pay gap data and is a signatory of Business in the Community’s Race at Work Charter. The organisation also takes the view that all companies over 250 employees should be reporting their ethnicity pay gap.
"Gathering the data is not easy," said Rain, "it can be sensitive as employees may not wish to disclose their ethnicity to their employer," she explained. "Employers should be transparent about why they are collecting this information to get employees on board and to foster trust in the business."
Baroness Ruby McGregor-Smith, author of the 2017 McGregor-Smith review on race in the workplace, made the point that ethnicity pay gap reporting should be made mandatory under the law. “We’ve had equal opportunities supposedly in the workplace for the past 50 years, but the workplace is clearly not equal,” she said.
"To make a real change, ethnicity pay gap reporting should be made compulsory. At present only 282 organisations voluntarily report their ethnicity pay gap data. Many organisations are simply not collecting the information."
When Ruby was compiling the McGregor-Smith review, only 49 of the 74 FTSE 100 companies that responded to her request for information about the ethnic backgrounds staff and their pay bands gave “meaningful data” on their pay gaps.
Making data collection compulsory will mean that boards will have to pay attention to the problem of inequality in their companies, she explained. As a former CEO, Ruby said, “I know if you have data you have to respond to data.”
Recruitment and progression
Collecting and understanding the data is the first step, acting on it is also imperative. Companies need to work to address ethnicity pay gaps and the underlying inequalities within companies that produce them. “Start with the data,” said Ruby, but then “make a plan to close the gap.”
Rain explained how the CBI is attempting to address its ethnicity pay gap through its recruitment and employee progression schemes. The organisation recruits 20% BAME candidates and when it is hiring for a managerial role, the CBI ensures that there is always at least one BAME candidate on the shortlist.
When looking at employee performance indicators, Rain said that it is important to examine whether there might be cultural issues affecting the performance of BAME employees. Data can be used to “drive deeper conversations” about workplace culture and barriers to employee progression, she said.
Ruby agreed that companies need to think about recruitment and progression. They need to draw from a diverse pool of candidates and make sure that diverse talent is sponsored so that they can progress within an organisation.
Intersectionality and culture
Naeema Choudry, partner at Eversheds Sutherland, made the point that we need to consider not just the diversity of protected characteristics, but also diversity within each category. Especially when assessing the progress that has been made in relation to the gender pay gap, Naeema made that point that “we tend to treat all women as one homogeneous entity and that isn’t the case,” – the experiences of people who fit into that single category can vary greatly.
Naeema said that instead we need to be taking a more intersectional approach to looking at the issue of pay. In her view, it should not be a “tick-box” exercise but rather a part of a wider diversity and inclusion strategy that fosters a culture of trust, thereby encouraging employees to be more open with their data.
Ruby said it's not just about the data but it's about culture too. Senior management needs to make sure that the culture in an organisation is not hindering the progression of diverse talent. When it comes to promotions, difference is often perceived as risk, said Ruby. "Just because someone looks different doesn't mean they are a risk," she said. Women faced many of these same challenges for years, being passed over for promotion because they were not given the same experiences as their male colleagues or because they were characterised in negative ways, for example, being branded "aggressive" if they talked too much. Companies need to do more culturally to change these perceptions and promote differently.
Later on in the session we came to the issue of the Equality Act itself. Naeema mentioned how, despite the fact that it is legally possible for employees to bring a claim for direct or indirect discrimination in pay on the basis of ethnicity, many people were hesitant to progress the issue in tribunals.
Ruby took us through some of the reasons why this might be happening: “It’s really expensive. And it can wreck your employment opportunities if you’re taking a big company on.” Her suggestion was that it’s time we changed the legislation to improve the protections for employees. “It’s all very vague. And it only covers gender. It’s outdated,” she said.
Key questions we answered:
- Rain, how should companies start the ethnicity pay gap reporting process?
- In February 2020, the CBI published Bridge the Gap: a guide setting out actions and good practices companies can take to tackle their ethnicity pay gaps.
- What I would say is, know you’re not alone – the number of companies reporting on their ethnicity pay gap voluntarily is growing.
- At the CBI, we started voluntarily reporting on our ethnicity pay gap last year, and plan to release our 2020 data and progress this autumn. Don’t just publish the data, what are you going to do about it?
- We have focused our actions to tackle the gap in four main areas. First, culture, to foster culture that is inclusive, open and not afraid of constructive challenge.
- Second, inclusive recruitment. Use diverse panels, and focus on ensuring more diverse candidate shortlists, especially for management roles. Apply the Rooney rule for all external management hires. Another key target is for 20% of all roles to be filled by BAME candidates.
- Third is progression and development. The aim here is to strengthen the pipeline, so we track how our BAME staff are faring within our performance development review system, prioritise BAME employees attending management development programmes, and ensure transparency through our pay and progression policy.
- Finally, leadership. We have signed the Race at Work Charter and ensured inclusion is a core part of our business strategy from the top.
- Monitor internal data on a monthly basis, we hope by gaining a better understanding of our data, and the experiences of our BAME staff we can enact real changes for our BAME colleagues.
- It’s a journey, and we have a long mountain to climb but we’ve made a start and determined to continue to strive to better equality.
- Rain, what have you encountered as best practice in this area?
- Just to cite a few examples on the issue of disclosure, PwC introduced a firm-wide ‘who do you think you are’ communications campaign to encourage people to share personal data. They explained why people were being asked for this information and how the data is used, e.g. for ethnicity pay gap analysis and action planning.
- Santander worked to make its disclosure rate campaign as targeted as possible, holding workshops with employees to understand reservations regarding disclosing their ethnicity.
- Shell centred its campaign around their diversity and inclusion day, organising discussions on ethnicity and sharing videos of senior leaders explaining why sharing information about ethnicity is important.
- Check out the CBI’s ‘Bridge the Gap’ report for more examples like these. One of most useful parts of the report is being able to look and learn from what other companies have done, including assessing existing practices at every step of your recruitment process, from reviewing job descriptions and how they are advertised, to processes around applications, assessments, and interviews.
- There may be some who are sceptical of the utility of ethnicity pay gap reporting, why should we introduce it?
- Closing the ethnicity pay gap is about making society fairer and overcoming entrenched inequalities. And it’s not only the right thing to do: the business case for it is watertight.
- The 2017 McGregor-Smith report found that closing the ethnicity pay gap could boost UK GDP by £24 billion per year, which represents adding an extra 1.3% to UK GDP.
- The CBI and its members fully back the introduction of mandatory ethnicity pay gap reporting. Just as gender pay gap reporting has shone a light on the barriers that women face in the workplace, and we believe that ethnicity pay gay reporting will be a powerful tool in uncovering the barriers ethnic minorities face at work.
- Baroness Ruby, what were the findings of your ‘Race in the workplace’ review in 2017 and what were the expectations of businesses after?
- Firstly, we identified that data is so important. We’ve had equal opportunity in the workplace, in theory, for the past 50 years. But in practice, we know this isn’t the case.
- We asked the FTSE 100 companies to give us their data on how much they pay their staff, broken down to their ethnicity. 74 responded and out of those, 49 provided meaningful data.
- Across every industry of the FTSE 100, the results said the same thing: if you were BAME and lucky enough to be employed by one of these companies, you were paid at a very junior level. You may get promoted once but after that there appeared to be a visible ceiling for BAME employees. Additionally, when I ran the numbers in 2017, I think we identified just ten people across all the numbers earning over £100k annually.
- We identified a number of key findings in the report, one being that companies need to start doing pay gap reporting.
- As of today, there are 282 that have signed up to the Race at Work Charter. This includes the Big Four accounting firms, lots of law firms and other companies. But, most of the FTSE companies haven’t.
- I initially recommended that this be done voluntarily, but in 2018, only 11% of employers were reporting this information. So, my recommendation changed to mandating it through legislation.
- We conducted a consultation on mandatory pay gap reporting and the results of that consultation were completed last year. The results haven’t been released and the government haven’t decided what they will do with the results.
- I have urged them to release the results because I know, as a former CEO, if you have data in front of you, you have to respond to it. Boards have to look at data that they have to report against. That is why it changes the narrative within a company.
- How do you ensure that companies who begin reporting this data, don’t do it as a tick box exercise, but take steps to ensure that their culture changes as well?
- It is around recruitment, progression, having a diverse candidate list and knowing how to talk about race.
- Those are the steps I outlined in my report to help companies ingrain a culture of equality in their workplace.
- The final point I’ll say is that it is all about promotions. Companies with more diverse people in leadership positions perform well.
- Naeema, could you give businesses advice on how to navigate GDPR on pay gap reporting?
- You have to be careful that you don’t inadvertently out people by reporting on their pay. That in itself gives you an idea of where you are as an organisation.
- If you don’t have a large group of BAME people in your employment, or even less in senior positions, what does it say about your recruitment practices and promotion practices?
- So, if legislation is introduced, you're going to have a period to build up to start collating that data, because otherwise you're going to face some difficulties.
- Your people have to trust you to give you the data and ensure that it will benefit them. They don’t want to give you the data about their ethnicity if they are worried it will hinder their promotion prospects.
- What do you think about the proposal to implement ‘name-blind’ recruitment and promotion?
- There is huge unconscious bias in the workplace. We all have biases. The question is to ensure that you understand your biases.
- So, I think name-blindness is a good place to start.
- You need a diverse shortlist. In Birmingham, over 50% of its population comes from a diverse background, so why shouldn’t companies recruit from their area? It should also be about the diversity of the panel interviewing the candidate.